W.C. No. 4-176-123Industrial Claim Appeals Office.
August 31, 1995
ORDER OF REMAND
The claimant seeks review of an order of the Director of the Division of Workers’ Compensation (Director) which “dismissed” his claim for penalties. We set the order aside and remand for entry of a new order.
The Director’s order, dismissing the claim for penalties under the statute currently codified at § 8-43-304(1), C.R.S. (1995 Cum. Supp.), may be summarized as follows. On December 16, 1994, the respondent filed a General Admission of Liability terminating the claimant’s temporary total disability benefits as of November 28, 1994. The basis of the admission was a report of the treating physician, Dr. Kleiner, which opined that the claimant reached maximum medical improvement (MMI) on November 16, 1994.
Citing our decision in O’Grady v. Denver Public School District,
W.C. No. 4-151-533, November 18, 1994, the Director determined that the respondent’s General Admission of Liability violated Rules of Procedure IX(C)(1)(a), 7 Code Colo. Reg. 1101-3 at 34, and IV(G)(1), 7 Code Colo. Reg. 1101-3 at 6. Specifically, the Director determined that the admission did not “state a position” on permanent disability benefits by either admitting or denying liability for permanent disability.
Nevertheless, the Director dismissed the claim for penalties. In support of this result, the Director acknowledged the respondent’s “efforts to come into compliance” by retroactively reinstating temporary total disability benefits. The Director also cited the respondent’s willingness to pay interest on the unpaid temporary disability benefits.
On review, the claimant contends that the Director erred in failing to assess a penalty. The claimant argues that, because the Director found a violation of the Rules of Procedure, imposition of a penalty is mandatory under § 8-43-304(1). Conversely, the respondent asserts that the rules were not violated, and in any event, the Director properly exercised her discretion to deny a penalty. We agree with the claimant.
Initially, we decline the respondent’s invitation to uphold the Director’s order on the ground that the December 16 admission of liability did not violate Rules of Procedure IV(G)(1) and IX(C)(1)(a). In O’Grady v. Denver Public School District, supra, we held that the apparent purpose of these rules “is to afford respondents an opportunity for unilateral termination of temporary disability benefits, while ensuring that the claimant will continue to receive permanent disability benefits without lengthy interruption pending a hearing.” In view of this purpose, we determined that use of the word “shall” in Rule IV(G)(1) creates a mandatory requirement that respondents admit or deny liability for permanent disability benefits when unilaterally terminating temporary disability benefits under Rule IX. We also held that it is not rational to argue that the rules allow respondents to state a position concerning permanent partial disability by “not taking a position.”
We decline to depart from our holding in O’Grady v. Denver Public School District, supra. Consequently, the Director correctly determined that the respondent violated the Rules of Procedure by unilaterally terminating the claimant’s temporary disability benefits without admitting or denying liability for permanent disability benefits.
Moreover, we agree with the claimant that the Director erred in failing to impose any penalty on the respondent for its violation of the rules. The pertinent portion of § 8-43-304(1) provides as follows:
“Any employer or insurer . . . who . . . fails or refuses to perform any duty lawfully enjoined in the time prescribed by the director or panel . . . and shall also be punished by a fine of not more than five hundred dollars per day for each such offense . . .” (Emphasis added.)
The General Assembly’s use of the word “shall” indicates a mandatory requirement. Burns v. Robinson Dairy, Inc., 911 P.2d 661 Colo. App. 1995; Hillebrand Construction Co. v. Worf, 780 P.2d 24
(Colo.App. 1989). Thus, under § 8-53-102(2), C.R.S. (1986 Repl. Vol. 3B) [predecessor to the amended statute currently codified at § 8-43-203(2), C.R.S. (1995 Cum. Supp.)], it was held that use of the word “shall” created a mandatory penalty for failure timely to admit or deny liability. Smith v. Myron Stratton Home, 676 P.2d 1196 (Colo. 1984).
Here, § 8-43-304(1) states that a violator “shall” be punished by imposition of a penalty. The plain meaning of this statute requires the Director, or an administrative law judge, to impose a penalty when a party “fails or refuses” to perform a lawfully enjoined duty. Thus, as the claimant argues, the Director did not have authority to excuse the respondent’s violation of the rules. Rather, as we stated in Crawford v. Presbyterian/St. Lukes Health Services, W.C. No. 4-147-223, December 8, 1993, “the statute does not provide a minimum penalty, it implicitly authorizes the Director to impose any penalty between one cent and five hundred dollars per day for each offense.”
Consequently, we hold that the matter must be remanded to the Director to determine the amount of the penalty to be imposed for the respondent’s violation of the rules. Although we hold that the Director must impose a penalty, she retains substantial discretion to determine the amount of the penalty considering the circumstances of the case. Crawford v. Presbyterian/St. Lukes Health Services, supra.
In reaching this result, we are not unmindful of Rule of Procedure XI(G)(1)-(4), 7 Code Colo. Reg. 1101-3 at 42. The rule states as follows:
“Whenever any rule in the Workers’ Compensation Rules of Procedure has been violated, the director may:
1. impose penalties pursuant to § 8-43-304, C.R.S.,
2. request that the commissioner of insurance revoke or suspend the insurance carrier’s license, pursuant to § 8-44-106, C.R.S.,
3. request that the executive director revoke or suspend an employer’s self-insurance permit or impose additional terms and conditions for the permit, or
4. impose penalties otherwise authorized by the act.”
The respondent asserts that the rule’s use of the word “may” demonstrates that the Director has discretion as to whether to impose a penalty, under § 8-43-304(1), for violation of the rules. In our view, such an interpretation of Rule XI(G) would be contrary to the statutory mandate, contained in § 8-43-304(1), requiring imposition of penalties for violations of the Rules of Procedure. Thus, if Rule XI (G) were interpreted in this manner, we would consider it to be invalid. See Riley Family Trust v. Hood, 874 P.2d 503 (Colo.App. 1994) (an administrative regulation is not the equivalent of a statute, and may not be inconsistent with the underlying statute).
However, we do not perceive Rule XI(G) to be inconsistent with §8-43-304(1). Rather, we understand the rule’s use of the word “may” to mean that the Director has several courses of action which may be pursued in the event the Rules of Procedure have been violated. One of these courses is the mandatory imposition of a penalty “pursuant” to § 8-43-304. Thus, we interpret the rule as incorporating the mandatory provisions of §8-43-304(1).
IT IS THEREFORE ORDERED that the Director’s order, dated March 29, 1995, is set aside insofar as it denied imposition of a penalty. The matter is remanded for entry of a new order which determines the amount of the penalty to be imposed for the respondent’s violation of the Rules of Procedure.
INDUSTRIAL CLAIM APPEALS PANEL
___________________________________ David Cain
___________________________________ Bill Whitacre
Copies of this decision were mailed August 31, 1995 to the following parties:
Thomas T. Gregory, 422 S. Francis St., Longmont, CO 80501
Ball Corporation, Hillary Johnson, Esq., P.O. Box 1235, Broomfield, CO 80020-1235
Ball Aerospace, Attn: Jan Larson, P.O. Box 1062, Boulder, CO 80306
Gates McDonald Co., Attn: Susan Twomey, P.O. Box 741027, Dallas, TX 75374-1027
Thomas D. Hacker, Esq., 1655 Lafayette St., Ste. 301, Denver, CO 80218
(For the Claimant)
Ronald C. Jaynes, Esq., 455 Sherman St., Ste. 210, Denver, CO 80203
(For the Respondent)
By: ___________________________